4 SFMP Phases 7 7 Swedish Approach Goal or ambition: opportunity for political allocation of resources management control, including evaluation of effects of activities covered by the state budget (i.e. results based) Strong adherence to: Partnership between government and donor Government ownership of reform Long-term commitment years 8 8

8 Achievement and Impact (2) documented public accounting system new law for budget and accounts training department equipped with strategy, policy and procedure major training programme country-wide enhanced human capacity computerisation of key functions presentation of state accounts ( first time since 1975) quarterly budget execution reports (from 2000) modernised model, chart of accounts and new law in Achievement and Impact (3) We judged the project as providing: Reduction in risk in use of public funds Platform for change and modernisation Positive impact as: Capacity building Improvement over time Different measure is needed as a: Modernisation project with Hard outputs 16 16

10 Lessons Part 4 19 Long term commitment how was this possible? Sida approach and philosophy: Partnership Changes will take time Prepared for year commitment Matched MPF view: Capacity weaknesses Need for gradual, incremental change Avoiding risk and loss of control Building on success 20 20

11 Long term commitment how was this possible? (2) Difficult lesson from Phase 1 Swedish consultants advocated radical solution: Accrual, Double-entry Heavily computerised Rejected by MPF Both parties accepted: Gradualist approach - reinstate existing system Understand Document Train Long term commitment how was this possible? (3) Answer to question: Sida s philosophy and the MPF gradualist approach came together Partnership Lesson: Get the basics right first 22 22

12 Who led the design? Following rejection of phase 1: Left deliberately vague High level statements of purpose open-ended indication of direction In theory ministry made proposals for continuation In practice contracting team prepared in consultation Very integrated project Clear ownership of the ministry At least for first half of project! How was it sustained? Virtue of proceeding in a manner that was: Shared and consultative Subject to periodic joint review However this led to: Lack of ambition; and slow progress Not balancing inherent risks by ensuring Clarity of purpose Clear outputs Time based plan Targets, indicators 24 24

13 Commitment and Ownership Critical success factors - extent achieved? We concluded there was commitment Started before external pressure for change Strengthened as external pressure mounted But only for the first half of the project We Questioned: Ownership for the period Full acceptance of new accounting model Ownership Paradoxical Accepted plan for the period Passed new law in 2002 Nevertheless, we believe there was Incomplete buy-in to implications Confusion and misunderstanding over technicalities Different emphasis or prioritisation 26 26

14 High Level Goals management control evaluation of effects of activities covered by the state budget i.e. results based Team emphasised: Management accounting of spending departments MPF concerned with: Centralised control Reporting on use of funds Difference led to termination! Holistic Approach Too technically focused Big effort in training Unable to address HR management issues Threatened sustainability Projects should be: More holistic Part of an overall development strategy 28 28

15 Organic Structure of MPF a puzzle not yet put together Vacuum SFMP Project Board Comprehensive Reform Plan Lesson projects should sit within an overall strategy and business plan, addressing technical reform issues as well as institutional/organisational issues such as: business purpose and functions; structure; management; HR management and development. Lesson plan based on a comprehensive diagnostic 30 30

17 Unsuitable Model? We concluded: Not trying to impose Swedish model Model was feasible and operable Chart of accounts - an adaptation of Portuguese system Package IFMIS plans well thought through Track record in addressing capacity needs Not imposing accrual accounting in short or medium term Too Much to Accept? - Perceptions Undue emphasis on accrual standard As the goal Synonymous with modernisation Consistent with the project objectives Add to this Misunderstanding Clash of personalities Some breakdown in donor communication Unprecedented pressure from the IMF 34 34

18 Replacement Model Vision or Philosophy not shared Replacement Model Dropped emphasis on Spending department management accounting Decentralised expenditure control Reverted to centralised control and reporting First priority became single treasury account Avoid Technical Solutions Lesson where capacity is weak avoid reliance on the modernizing technical solutions placing undue importance on concepts such as: Accrual accounting Performance budgeting MTEF investing them with magical powers of solving all problems Lesson - design the solution in the country context 36 36

19 Donor Coordination and Technical Understanding Restricted scope for single bilateral donor Multi-donor interests must be Better coordinated Disputes avoided Technically informed Support should be Placed behind a government owned strategy Support the strategy (with projects or finance) Set up quality assurance arrangements Conclusion on Goals political allocation of resources and results based budgeting Weaknesses in management and budgeting capacity a risk to: availability of resources to carry out policy objectives capacity to specify a budget other than along organisational lines links between budget allocations and expected results greater accountability by linking intended results to outputs and outcomes, rather than just inputs. Not just a question of: technical capacity and understanding; but management culture Allowing managerial discretion in the use of inputs Delegation and accountability 38 38

20 Migration Path For environments lacking technical capacity information necessary required standard of accounting and reporting the ability to attribute costs to activities Question: Is performance budgeting appropriate? Is accrual accounting required? Cash versus Accrual Accrual accounting: Do not overstate the case Establish basic controls and compliance with law Recognise risks Only in context of wider public sector management reforms Substantial upgrade in computer and human capacities Accomplish in stages a very long term option 40 40

21 Performance Targets Suggest shorter term path should be: bring discussion of objectives and activities into the debate about expenditure allocations at the time of budget preparation encourage efforts towards improved performance by establishing performance targets provide the basis for the development of performance budgeting, as capacity allows Conclusion Important capacity development project Progressed in spirit of partnership Delivered slow progress Has a list of achievements Established a basis for modernisation Ultimate objectives: A lot for MPF to accept Not necessarily shared 42 42

22 Conclusion 2 Project terminated leaving lessons: Get the basics right first Do not over rely on technical solutions Importance of ownership Need for Context and country specific solutions Overall strategy in which project components fit Donor coordination and technical understanding 43 43

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